Halt Atm Surcharge, Banks Told

Order Follows Court Ruling

November 11, 1998|By KENNETH R. GOSSELIN; Courant Staff Writer

The state banking commissioner ordered three of the state's biggest banks to stop imposing a second ATM fee on non-customers Tuesday, a day after a federal appeals judge ruled that the fee's legality should be decided in state courts.

The three banks -- Fleet, BankBoston and First Union -- all agreed to comply with the cease-and-desist order.

Fleet and First Union halted the so-called surcharge Tuesday. BankBoston said that with the Veterans Day holiday today, it would not stop the fee until early Thursday.

Within hours of Tuesday's order, however, Fleet's lawyers appeared in Superior Court in Hartford, seeking an injunction against the order. The injunction seeks to allow the fee while Fleet asks the state courts to rule on the legality of the surcharge.

A hearing on the injunction will be held Monday at 2 p.m.

Consumers already pay a fee to their own bank when they use another bank's machine, and part of that fee goes to the bank whose machine was used. The surcharge comes on top of that fee, is deducted at the time of the transaction, and goes directly to the bank that owns the machine.

Banking Commissioner John P. Burke was able to issue Tuesday's order because the federal appeals court in New York Monday effectively tossed out a lawsuit by Fleet over the second fee. The lawsuit, filed in January 1997, challenged Burke's opinion that the surcharge is not permitted under state statutes.

The case landed in the 2nd Circuit Court of Appeals after Attorney General Richard Blumenthal appealed a lower federal court ruling in October that sided with Fleet and cleared the way for the surcharge.

Since Monday, Blumenthal has been in and out of court, defending the state against motions by both First Union and Fleet.

``We're fighting trench warfare in the courts, day by day, and so far, we're winning for the consumer,'' Blumenthal said.

Fleet, BankBoston and First Union have imposed the $1 surcharge in Connecticut since a temporary stay was lifted by the federal appeals court last month.

Burke said Tuesday he agrees that the issue should be resolved in the state's court system.

``The surcharge issue is one that impacts Connecticut banking law, and should therefore be resolved in state court,'' Burke said, in a statement.

Banks supporting the surcharge say it is reasonable to charge non-customers an additional fee for convenience. Soaring non-customer use of the machines is increasing maintenance, repair and replacement costs, they say.

Consumer groups, however, say the surcharge is the ultimate grab against consumers already burdened by more and higher fees for routine banking services.

Steven Gurney, program director for the Connecticut Public Interest Research Group, said Tuesday that Burke's order is a victory for consumers and ``an important step forward for consumer fairness.''

The second ATM fee has become common across the country, with Connecticut only one of two states where it has been banned. Fleet, BankBoston and First Union impose the surcharge in other states where they operate ATMs.

David Tedeschi, a banking department spokesman, said consumers hit with the surcharge in recent weeks would not be able to seek refunds because they were imposed legally once the court lifted the temporary stay.

However, surcharges imposed Tuesday after the order was imposed might be another matter, he said. Fleet said it halted surcharging by 1 p.m. Tuesday; First Union stopped at 6:30 p.m. BankBoston will continue surcharging through early Thursday.

The banks were notified of the order, which was effective immediately, between 11 a.m. and 1 p.m., Tedeschi said. Although the order targets the three banks, it applies to all in the state.